I note the calls for more discussion on the trap that the ‘left’ has made for itself by buying into the globalisation/political capture myth. As I have noted previously, I am currently researching a new book on this topic which might appear in 2016 but more likely early 2017, such is the delays in publishing. My current research is focusing on the 1960s and 1970s. I am exploring the deep infighting within the French state between the ‘Keynesians’ in the planning ministry and the ‘Monetarists’ in the finance ministry, which shaped the way the French ‘left’ dealt with issues of monetary integration and the like. I am also tracing the evolution of ‘left’ macroeconomic thinking, or rather, the absence of it, in the late 1960s as the Bretton Woods fixed exchange rate system collapsed and fiat currency freedom was taken up by governments around the world. In 1973, after several years of work, American sociologist James O’Connor published his book “The Fiscal Crisis of the State”, which was considered by many on the ‘left’ to explain why the Keynesian policy era had failed. This book and the derivative literature that followed it was extremely influential among ‘left’ scholars and effectively negated their capacity to challenge, what by the mid-1970s, was becoming the Monetarist resurgence. We can trace back the failure of the ‘left’ to fight against austerity to this period. This is just part of the work I am doing on this topic at present.
Australia has a grand Greek tradition. My hometown of Melbourne is the third-largest Greek speaking city in the World as a result of the Post World War 2 migration. In 2011, Thessaloniki – Greece’s second largest city had a population of 1,104,460 (the overall Metropolitan Area). According the last Australian Census of Population and Housing (2011), there were 123,462 Males and 128,755 Females (total 252,217) who spoke Greek at home although 378,270 people of Greek ancestry were accounted for. Most of them live in Melbourne. Growing up in Melbourne meant there was always a ‘Greek’ element present in my childhood particularly at school as new migrants arrived. But that cultural affinity with Greece is about as close as Australia will ever come to mimicking it. Australia can never become “Asia’s version of Greece” because we do not use an “Asian currency”, we retain total control over our central bank (the currency issuer), and we do not issue public debt in a foreign currency (like the euro as Greece does). The only way we could become like Greece is if we were to join the Eurozone … and then pigs might fly!
When the GFC emerged and confirmed what Modern Monetary Theory (MMT) proponents had been predicting for more than a decade, I initially thought that this might be the ‘paradigm-shift’ line in the sand with respect to economic theory and policy. The OPEC oil price hikes in the 1970s provided the ‘space’ for Monetarism to usurp Keynesian thinking – not as a triumph of evidence and facts but as an ideological shift in thinking. The ideological battle had been going on for three decades in the academy but the oil crises exposed policy flaws in the Keynesian orthodoxy that were exploited by the Monetarists to allow them to reintroduce ideas (and policies) that had been completely discredited during the Great Depression of the 1930s. In the same that the dominant paradigm collapsed in the 1970s, I thought the GFC would so destroy the public credibility of Monetarism’s latest iteration, which we call neo-liberalism, that we could find intellectual space to restore rigor to economic policy and the way economics was taught in the universities. I even thought that the pragmatic and dramatically successful use of fiscal stimulus in most advanced countries would provide the empirical reinforcement necessary to repudiate and expunge neo-liberalism forever. I was wrong. But what the GFC has achieved as neo-liberalism hangs onto the reigns of power in policy making circles is a major breakdown of the so-called ‘European Project’. The creation of ‘Europe’, which was conceived after World War 2 as a means to maintain peace and create prosperity among previously hostile nations, was a major human achievement in the C20th. That vision is now in tatters as the neo-liberals, blinkered by their own Groupthink, steadily dismantle the meaning and application of that great Post WW2 experiment. Jean Monnet and Robert Schuman would be turning over in their graves to see what their ‘Project’ has become under the domination of Wolfgang Schäuble and his lackeys in the Eurogroup. So we might see the demise of neo-liberalism after all as it destroys the grand European political project
Here are the answers with discussion for yesterday’s quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.
Welcome to the Billy Blog Saturday Quiz. The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.
Its my Friday lay day blog where I pretend to take it easy. Today I have a nice story to contrast with the shocking news we have been following over the last month or so from Europe. The economics news has been dominated by the madness and badness of the EU in recent weeks and how the miserably depressed Greece has been brought to heel by the EU bullies and will have to inflict even more austerity on its suffering people. Unemployment already above 26 per cent will rise further and more of its youth will head to other shores in search of opportunities. It is a process that is hollowing out the capacity of a nation. They do things differently in South Korea. The Korean government appears to actually care about its people. It provides a lesson for all nations who have become infected by the Recession Cult of Austerity (RCA).
An editorial article in BloombergView (July 15, 2015) – Leaving Euro Is Better Than Eternal Greek Crisis – argued, with providing evidence, that “it would be better for Europe’s economic policy makers to spend their time figuring out how to manage an orderly Greek exit than continuing to negotiate deal after sure-to-fail deal to keep Greece in the euro”. Regular readers will know that I support an orderly breakup of the entire monetary union and if that is not possible then individual nations should exit on their own accord and reestablish some sane proportion in their macroeconomic policy settings. But exit is not a sufficient condition for restoring prosperity to a nation. They would also have to simultaneously abandon the neo-liberal Groupthink that holds the Eurozone economy in a vice-like grip of austerity. Under those provisos, the Greek economy would return to growth immediately and they could eliminate unemployment within a few quarters.
Under an accompanying heading – “Beyond Greece” – the German Handelsblatt (a daily financial/business newspaper) published the article (July 14, 2015) – The Uncomfortable Truth About Debt. It was meant to be some sort of justification for the touch German stance against Greece. The authors claimed that “Germany has been hounded internationally for taking a hard line on Greece. But there is a bigger problem on the horizon: the debt mountain in Europe, and the world, is too high”. My BS sensors were on high alert as I read the opening paragraphs. There was good reason for my alert – the article, which would have been read by tens of thousands of German corporate sector managers etc, demonstrates a palpable failure to comprehend what the real issues confronting the Eurozone are and how Eurozone Member States (19 of them) are fundamentally different in terms of fiscal capacity relative to nations that issue their own currency. No wonder the political classes in Germany can get away with behaving so abominably.
There was an article in yesterday’s Australian Financial Review (July 12, 2015) – Left and right labels wear thin, lose definition – which as the title suggests tried to argue that it is hard “to know who or what is left or right wing any more”. The article used a number of examples, including the so-called Communist government of China bailing out its (farcical) share market and the Greek ‘far left’ government agreeing to austerity and on-going debt demands from the creditors, to suggest that it is no longer easy delineating what is left and what is right and dubbing policies accordingly (one way or another) “provides little illumination”. This is a recurring theme in recent years and part of the neo-liberal attempt to blur what it going on and treat ideological stances as reality or factual assessments. It is still very clear to me what is a left-wing position. The rest of the article provides in his own words “little illumination” about the issue. The argument in this blog is that the categories remain influential and meaningful but are blurred through ignorance as to how the monetary system operates. Left-wingers fall prey to right-wing policies because they have bought the TINA myth. That is the only way one could explain the Syriza disaster, for example.
It appears the Germans (with their Finish and Slovak cronies) have lost all sense of reason, if they ever had any. Germany has the socio-pathological excuse of having suffered from an irrational ‘inflation angst’ since the 1930s and has forgotten its disastrous conduct during the 1930s and 1940s and also the generosity shown it by allied nations who had destroyed its demonic martial ambitions. Finland and Slovakia have no such excuse. They are just behaving as jumped-up, vindictive show ponies who are not that far from being in Greece’s situation themselves. Sure the Finns have a national guilt about their own notorious complicity with the Nazis in the 1940s but what makes them such a nasty conservative ally to the Germans is an interesting question. It also seems to be hard keeping track with the latest ‘negotiating offer’ from either side. But the trend seems obvious. The Greeks offer to bend over further and are met by a barrage of “it is going to be hard to accept this”, followed by a Troika offer (now generalised as the Eurogroup minus Greece which is harsher than the last. And so it goes – from ridiculous to absurd or to quote a headline over the weekend – From the Absurd to the Tragic, which I thought was an understatement. There are also a plethora of ‘plans’ for Greece being circulated by all and sundry – most of which hang on to the need for the nation to run ‘primary fiscal surpluses’, with no reference to the scale of the disaster before us (or rather the Greek people). It is surreal that this daily farce and public humiliation (like the medieval parading of a recalcitrant in stocks) is being clothed as ‘governance’. Only in Europe really.